Managing capital flows: The case of Malaysia

This paper reviews policies taken to address capital flows in Malaysia from 1999 to 2007. In the face of increasingly volatile capital flows and their repercussions on the domestic economy, the monetary authority needs to pursue active monitoring and intervention. Moreover, having a resilient financial sector with prudential regulations may help overcome the negative effects of capital reversal. Other conditions include sound macroeconomic policies, a strong domestic sector, and large international reserves.